Engagement of consultants by Horowhenua District Council

31 January 2023

Monique Davidson
Chief Executive
Horowhenua District Council
126 Oxford Street
Levin 5510

Tēnā koe Ms Davidson,



As you are aware, we received correspondence that raised concerns about the engagement by Horowhenua District Council (the Council) of external consultants to provide services in relation to the Levin landfill.

The future of the landfill was uncertain and the Council had received conflicting reports about its future use, including whether it should remain open or be closed.

In May 2020, the then Chief Executive decided that the Council should engage external experts to review the work that had been done to that point and the options available to the Council. Morrison Solutions Limited (Morrison Solutions) was engaged and between May 2020 and May 2022, the Council paid Morrison Solutions about $895,000 for services related to the landfill.

The specific concerns raised with us were that:

  • the Council engaged consultants using a direct procurement approach, which was inconsistent with the Council’s procurement policy and/or related guidelines;
  • the costs of consultants were significant and incurred without appropriate delegated authority; and
  • a potential conflict of interest had not been appropriately managed.

As we describe later in this letter, the Council had a procurement policy but it was not followed in this case. Many of the disciplines of good procurement practice were missing, including consideration of the overall potential costs of the work, a procurement plan or business case to demonstrate the need for the procurement, documentation supporting the selection and engagement process that was followed, and written contracts for the work that was carried out. We would expect to see all of these in a procurement process where ratepayer money is being spent. Many were also requirements of the Council’s own policies.

In this case, nearly $900,000 of public money was spent. The spending was within delegated authority, and we have not identified a conflict of interest. However, the absence of a written and clear rationale for the work and selection of the provider, and absence of a contract, raises questions about whether that spending represents good value for money.

Having appropriate policies and processes for procurement activities, and following them, supports trust and confidence that public organisations are making good decisions when spending public money. That confidence can be lost if established policies and processes are not followed or documented.

It is also important that senior leaders in an organisation lead by example in following those processes. The tone set by leaders is crucial to demonstrating what is seen as acceptable behaviour in an organisation.

The Council has recently made some improvements to its policies and practices for procurement, and we encourage the Council to consider our comments as part of further improvements.

What we did

After the concerns were raised with us, we sought information from the Council, including information about how the services of Morrison Solutions had been engaged as well as the Council’s procurement policies and practices generally.

That information request included:

  • the Council’s Procurement Policy, Procurement overview, Procurement Policy Guidelines, Template procurement plans, Procurement Risk Analysis Tool, Procurement Business Case Template and Communication Plan Template;
  • all email correspondence between the Council and Morrison Solutions; and
  • other related information.

As part of our work, we spoke to employees at the Council. We also spoke to the previous Chief Executive of the Council, who was involved in procuring the services.

The engagement of Morrison Solutions and the work it did

Reasons for the work

In early 2020, the Council received a copy of a report (the 2020 report), commissioned by the Landfill Agreement Project Management Group (PMG), that set out options for the Levin landfill.1 That report recommended the Council retain the landfill and continue to operate it. An earlier report (from around 2017) had recommended closing the landfill (based on the completion of a desktop review).

The previous Chief Executive told us that he felt the councillors could not make a final decision based on the 2020 report because it was not clear whether the financial assumptions on which it was based were robust. He considered that an independent review of that report (and the advice it contained) was necessary. It was intended that this initial review would be a high-level review of the work that had already been carried out and the options available to the Council.

He explained that at that time there was no in-house capability in waste management. In his view, it was necessary to engage an independent party with relevant expertise and the ability to run contract processes and negotiations. He referred to there being added time pressure because the Council’s contract for the provision of solid waste services was due to expire in November 2021. The incumbent provider had indicated that once the contract ended, they would no longer be using the Levin landfill. Therefore, it was important for the Council to decide on the future of the landfill before the contract expired.

Initial engagement

The previous Chief Executive engaged Morrison Solutions directly to carry out an agreed scope of work on the future of the Levin landfill. He told us that he considered three other potential providers who might have the relevant experience but that none were appropriate, in his view. For example, one firm was involved in the day-to-day operation of the landfill, and another had provided one of the earlier reports.

Separately, Morrison Solutions was suggested to him by the independent Chairperson of the Council’s Audit and Risk Committee. He also told us that he consulted with other council chief executives who had used Morrison Solutions previously. However, this process and the reasons for selecting Morrison Solutions were not documented.

After the previous Chief Executive contacted Morrison Solutions, the Managing Director of the company emailed an indicative outline of the scope of work. That included:

  1. Overview and preliminary analysis of all relevant documents. This was to include both technical documents and documents containing opinions (for example reports, presentations, or recommendations).
  2. Developing initial high-level options analysis.
  3. Discussions about how the work would be managed (for example, liaising directly with the Chief Executive and/or Mayor, or establishing a sub-committee).
  4. Presenting a preliminary view of high-level options.
  5. Undertaking more detailed analysis of options and presenting results for discussion and debate.
  6. Finalising analysis and gaining agreement (or consensus) on the robustness of analysis in preparation for an initial Council debate.
  7. Presenting analysis to Council and facilitating a preferred strategy to implement. It was envisaged that this may take two sessions.
  8. Agreeing how the implementation should be managed.

Morrison Solutions indicated that the work being contemplated might take about 12 months.

We were told that the items included in the scope of work were indicative only and that the full scope of work could be determined only after Morrison Solutions started the work. Once it had completed the preliminary analysis, it would know how complete or robust the underlying assumptions and other supporting information were and would then be able to indicate what further work would be required.

The previous Chief Executive told us that the initial agreement with Morrison Solutions was a verbal agreement for the first two steps in the scope of work above. The estimated cost of this work was about $7,500 and would be no more than $20,000. The Council has been unable to locate a written contract with Morrison Solutions for this work.

Work by Morrison Solutions

Morrison Solutions’ initial work was to review the advice provided to the PMG. The recommendation from this initial review was that a business case about the future of the landfill be completed, to provide a more transparent and robust report to better inform the Councillors on the options. The previous Chief Executive also told us that he felt it was important that the business case considered other aspects (social, environmental, and cultural) in making its decision, rather than just financial aspects.

The Council told us that the actual cost of this initial work was $7,360.

Morrison Solutions conveyed its initial findings on 28 May 2020 and recommended a brief business case be prepared, covering the first two steps. The previous Chief Executive decided that Morrison Solutions would be engaged for this work. An email from Morrison Solutions dated 28 August 2020 sets out a proposal for developing a business case to assess the best option for the disposal of refuse for the district. The estimate for delivering the business case was about $25,000. 

We were told that as Morrison Solutions was preparing the business case, it became apparent that a significant amount of additional work would be needed, much of it to determine the correct inputs into the business case. In some instances, Morrison Solutions was asked to do the work. In other, more technically complex matters, other firms were engaged. In most instances, Morrison Solutions selected other firms that were engaged by the Council with the previous Chief Executive’s approval and within delegation.

As well as developing the business case for the review of the landfill, the type of work done by Morrison Solutions over that time included:

  • developing the Request for Proposal (RFP) process and timeline for that review, and managing the RFP process;
  • reviewing existing contracts for the Levin landfill;
  • setting out the process of evaluation, business case review, consultation, and Council decision making and timeframes;
  • specifying the terms of the RFP and preparing information for tenderers;
  • advising on the appointment of the Tender Evaluation Team;
  • developing the procurement plan and risk plan for the tender;
  • preparing reports for Council and presenting to Council meetings and workshops;
  • supporting the preparation of the Future of the Levin Landfill community consultation document; and
  • helping negotiate the terms of waste disposal contracts with successful tenderers.

Each of these tasks were agreed by the previous Chief Executive at the time that they were required. In June 2021, in an email to Councillors, Morrison Solutions described its work as “acting as trusted advisor to the CEO regarding the Levin landfill and related matters”.

Over the next two years, Morrison Solutions delivered the work outlined above and invoiced the Council monthly based on time incurred. Invoices were provided to the previous Chief Executive by Morrison Solutions and paid monthly by the Council. Many of those invoices were greater than $50,000. The total amount invoiced and paid by the Council was $895,172. 

The Council does not have any records of written agreements for the work carried out during this time.

Our comments

The Council’s procurement policy and approach

We expect all public organisations to have a procurement policy and processes that are tailored to their operating environment. Having a suitable policy and processes can help an organisation show that its procurement decisions have been made appropriately. They can also help to ensure that the decision-making process (including any risks that were identified and how they were managed) is well documented.

The Council had a procurement policy, which provided for a different approach depending on the value and complexity of each procurement.

  • For any low-value procurement (under $30,000), the Council could use a preferred supplier or, if there was not one, obtain written quotes from three potential providers.
  • For a procurement greater than $30,000, a risk analysis was required to determine the best approach:
    • For procurements valued between $30,000-$100,000 the Council could use a preferred supplier or complete a simple procurement plan, obtain “one-up” approval for that plan, and approach the market for a provider.
    • Any procurement valued at over $100,000, or otherwise identified as high risk, required a complex procurement plan to be prepared, approval of that plan by the Procurement Review Group within the Council, and progress updates to the Projects Committee and the Audit/Risk/Finance Committee.2

The policy specified that the value of the procurement, for the purposes of determining the appropriate procurement approach, was the total potential value of the contract, over time.

The approach in this case

In this case, the Council’s procurement policy was not followed.

The value of the initial piece of work was estimated to be about $7,500 (but with an estimated maximum of $20,000). Therefore, on its face, the amount was a low value procurement, and a preferred supplier could be used or quotes obtained from three other providers.

However, Morrison Solutions was not a preferred supplier listed on the Council’s register of suppliers, and therefore not able to be engaged through that process. The alternative process – obtaining quotes from three other possible providers – was not followed. As described earlier, the previous Chief Executive decided that Morrison Solutions would provide the services and dealt directly with that firm, and agreed the work based on those direct discussions.

More significantly, it was likely, given the situation, that the value of services being procured would exceed $30,000 and this would mean other steps in the procurement policy would be required. Morrison Solutions had outlined a number of tasks, some of which had the potential to be substantial, and had indicated that the first one or two of these tasks could cost up to $20,000. It had also said that the work scoped could last 12 months. It would be reasonable for the Council to have considered the likely cost could well exceed the threshold for a low-value procurement. As it happened, that proved to be the case.  

We were also told by the previous Chief Executive that landfill matters can be complex and litigious and this might well have signalled that this was a higher risk procurement, which should have been supported by a complex procurement plan.

However, there was no procurement plan prepared, which is required for procurements between $30,000 and $100,000, if there was no preferred supplier. A good procurement plan will set out an organisation's objectives and how it intends to achieve them, as well as an outline of what is being procured and the cost involved. The plan should include a proposed strategy for engaging the market and a description of the type of procurement approach to be used. It should also record how the procurement complies with an organisation's procurement policy and where a departure or exemption from the expected practice is proposed.3

There was also no business case or underlying document outlining the reasons for the procurement. A good business case will provide the justification for an activity, and evaluate the costs, benefits, and risks of alternative options and present a recommendation for a preferred approach. A business case should set out the business need, describe how critical the services are, and how the services will support the business objectives. It should also demonstrate an understanding of the market and price drivers, and estimate the whole-of-life cost for the project. In this case, this analysis might have helped the Council better predict the complete cost of engaging Morrison Solutions and therefore what processes needed to be followed.

The previous Chief Executive explained to us the reasons he had for the procurement, and the analysis he did about the market and potential providers. However, as noted, this was not documented and was therefore not available to the Council or any other party who might seek some assurance about the process and the costs being incurred by the Council.

Although there was a proposed scope of work, there was no written contract between the Council and Morrison Solutions, for either the initial review work or the work that was commissioned over the subsequent two years. We were told that agreements to carry out the work were verbal. A written contract was expected under the Council’s policy and is good practice. A contract would normally also include a range of protections for the Council in the event of a dispute about work quality or other matters.

There was also no apparent attention paid to the increasing costs, or that the amount of money being paid to Morrison Solutions had taken the engagement well beyond the initial costs and the low-cost procurement approach associated with it. By the end of 2020, the costs had well exceeded $100,000, which put the services into a category requiring a complex procurement plan and reporting to Council committees.

The previous Chief Executive told us that costs were monitored through regular monthly financial reporting of costs incurred against budgets. However, in these reports the consultancy costs for Morrison Solutions and associated costs were not presented separately. Rather, they were included as part of the overall costs for the solid waste activity area. The costs of the work on the future of the Levin landfill were not shown separately and it is likely the scale of the overall costs was not evident. 

We accept that, at the point that Morrison Solutions was engaged, it might not have been possible to anticipate the amount of money eventually paid for the services provided. That said, it might well have been foreseen at the beginning that it would exceed the threshold for requiring a more formal approach for the engagement. It would have been possible to appreciate that the costs were increasing to the point where more discipline – such as tracking and reporting of overall costs – was necessary. In the end, nearly $900,000 of public money was spent. Although services have been provided for that money, the absence of a written and clear rationale for the work and selection of the provider, and a contract, means there is less confidence that the money has been well spent than if those steps had been taken.  

Having appropriate policies and processes for procurement activities and following them supports trust and confidence that public organisations are making good decisions when spending public money. It is also important that senior leaders in an organisation lead by example in following those processes. This sets a tone that complying with policies and processes is important and that those policies apply to everyone.

Conflicts of interest

One of the concerns raised with us was whether there was any connection between the previous Chief Executive and Morrison Solutions that presented a conflict of interest and might have influenced the procurement.

No conflicts of interest were declared in the Council’s records. Our inquiries have not identified anything that could indicate a pre-existing friendship or other business or personal relationship that might have required careful management. The previous Chief Executive confirmed that he had not worked with Morrison Solutions or any members of its staff before.

Although we have not identified a conflict of interest in this case, it is worth noting that situations like this can lead to questions about whether there is one. Having clear documentation supporting the decisions in the procurement provides visibility and supports trust that decisions have been made in the public’s best interests.

Current steps by the Council

Separately, an internal audit report of April 2021 highlighted weaknesses in the Council’s procurement practice, and the Council has taken several steps to improve processes as a result. This includes:

  • appointing a full time Procurement Advisor;
  • commissioning an external provider to carry out a gap analysis review (covering documentation, processes, and general procurement knowledge);
  • implementing accepted recommendations; and
  • adopting an updated Procurement Policy and Procurement Strategy in September 2022.

The updated procurement policy:

  • provides clear guidance about the Council’s identified categories of procurement and managing conflicts of interest;
  • requires regular procurement reporting to the Councillors, setting out procurements completed over $200,000 and a summary of expenditure on the top 20 suppliers;
  • changes the membership of the Council’s Procurement Review Group to include an elected member representative; and
  • indicates that procurement over $1 million or high-risk and over $200,000 will require approval by the Councillors, after endorsement by the Procurement Review Group, which includes the Chief Executive.

We note the Council’s updated approach to procurement has an emphasis on planning and expects staff to consider and use the most suitable selection method for a procurement, which looks at whole-of-life costs.

We also note that the updated policy strengthens the Council’s expectations of its staff in relation to the role/importance of the Government Procurement Rules. Although not bound by the Rules, the Council has decided to use them as a guide for procurement activities. We would encourage all local authorities to consider this approach. 

In relation to including elected members as part of the Procurement Review Group, we have seen similar arrangements in other councils. We note that while it might increase the visibility of procurement with elected members, it is also useful to be mindful of the distinction between governance and management, and the importance of keeping the roles separated. Where elected members become too involved in day-to-day operational decisions, there is a risk they may limit their ability to effectively govern the organisation.

Concluding comments

The Council has acknowledged that previous procurement policies and processes were not as strong as they could have been and were not followed in this instance.

In our view, the steps the Council is taking are positive changes and they increase the visibility of significant procurement activity in and by the Council.

We encourage the Council to continue improving and strengthening its procurement processes and policies and ensuring that they are well embedded throughout the organisation, including when procurement is led by senior managers. This might include providing training sessions for staff and newly elected members to ensure that relevant roles and responsibilities are clearly understood.

We note that Audit New Zealand’s website has a range of guides on “what good looks like” in the context of contract management and procurement, which you might find useful.

It is likely that the Council will need some time to address and embed the changes. Our Appointed Auditor will follow up on the improvements that you have indicated the Council has made. Please provide the Appointed Auditor with an update in six months, setting out what progress has been made with implementing these improvements.

The matters raised here could serve as a useful reminder for other public organisations and are of interest to your community. We therefore intend to publish this letter on our website.

We thank you, the Council staff, and the previous Chief Executive for the assistance provided in responding to our questions about this matter.

Nāku noa, nā

John Ryan
Controller and Auditor-General

1: The PMG has been established as the result of the Landfill Agreement, to find common ground in the operation of the landfill and investigations for early closure and remediation of the site. The PMG has Council, community, and iwi representatives (The Future of Levin Landfill - Horowhenua District Council).

2: The Procurement Review Group is a group established by the Senior Management Team to manage the overall governance of procurement.

3: We have seen correspondence that indicates that Morrison Solutions and the previous Chief Executive were aware in 2021 of the need for a procurement plan, approved by the Council’s Procurement Review Group (the Review Group), as part of the Request for Proposal process for the Horowhenua District Council Refuse Disposal Project, a process being managed by Morrison Solutions. It is not clear why a similar plan was not prepared for the earlier engagement of Morrison Solutions.